What happened this week: As far as business activity is concerned the week was almost a non event. Ski holidays, carnival and the Lunar New Year in Asia have had their effects and a large number of players was not available during the week. Consequently the number of inquiries was light and only a few sales were concluded. Most of the serious activity came from Asia, what was a surprise knowing, that most people had even switched their phones off. Bids were below asking levels, but at the end bits and pieces in dairy cows were concluded and the right timing in the currency market could make prices to become almost right. The continental European hide market was paralysed by the endless negotiations at the abattoirs. Butchers take a strong position throwing the lower slaughter into the ring and isolated tanner activity to sniff around for direct deals. At the same time processing margins are presently squeezed by higher cost and lower hide weights. In addition are falling leather prices and rising cost for chemicals and energy also attacking tanners calculations.Consequently they are trying to lower the raw material cost with all ambition. The European raw hide of average

quality is consequently carrying the highest risk potential as it is threatened to be eventually substituted by cheaper origins – preferably from the USD origins. The top quality end – and these are very few hides left – is less touched, because the real luxury and specialty market is still in decent shape. There are quite a few in the European hide business who are confident, that the market is going to be better after the Asian holidays. Well, the question is, what means better? Activity will certainly increase, but if this can be turned into higher raw material prices is – at least in our view – for the moment quite questionable. It is hard to believe, that tanners are really so desperate for average quality hides, that they would consider to pay significantly higher prices – in USD terms, as long at least as the leather prices cant be turned around. Being right in the season and no new volume (upholstery) leather contracts needs to be negotiated at the moment, it is hard to find an argument which would justify a rally in raw material prices. The main statement from the optimists is the falling kill towards the second quarter. Well, this might be a local argument, but on  

a global scale we have already seen in the last year, that regional reduced offer can be presently replaced by other origins and here in particular from South America. So, if the optimist will be right at the end it would require a substantial increase in leather orders which would force tanners into the raw material market to keep market share. However, we don’t see for the coming months, that higher demand would necessarily accompanied by higher prices. The kill: We are completely on track. The kill remains reasonably steady and only marginal and regional variations have been noticed during the week. The kill of bulls remains fortunately better than one would expect for the time of the year, but hide weights are lower, what is not a surprise considering, that a lot of animals are killed more for the subsidy rather than being really market ready..  What do we expect? In our opinion the market continues to remain in the same narrow price band we see now already for a long time. Price variations could just be triggered by currency variations and we cant see anything else to influence the market at the moment. However, one can sense a rise in speculative tensions, but we do not expect any influence on prices in the short term.